Bellow is a step by step guide for creating Microsoft Virtual PC image for SharePoint 2007 development. The steps include configuration settings for creating Virtual PC machine & hard disk, installation & optimization of Windows 2008 and all development tools needed for development of SharePoint 2007. The step includes following tasks in order:

This is a very good article on what options to select while creating virtual machine using the Microsoft Virtual PC. One change I strongly recommend is to use dynamic hard disk with hard disk size expandable up to 120GB. In dynamic hard disk you don’t need all 120GB space immediately and it will grow as needed. Max you can select is 130GB.

2. Run Windows Updates & select option for update from other products

Click at Get updates for more products. A new windows will open. Scroll down and accept the terms and click at install.

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Below is the script of his Essay:
My Grandparents
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